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Spike in divorces linked to tax loophole

Updated: 2013-10-30 00:34
By Fan Feifei ( China Daily)

Spike in divorces linked to tax loophole

A Shanghai marriage registration office displays a sign warning about risks in the property market and telling buyers to think twice before getting divorced. Divorce rates in some major cities have risen dramatically in the first three quarters, with experts saying many couples are divorcing to avoid paying property taxes. PROVIDED TO CHINA DAIL

Beijing's divorce rate has increased by more than 40 percent in the first three quarters of this year from the same period last year. Experts said that might be because couples are seeking to avoid a property tax imposed earlier this year.

According to the Beijing Civil Affairs Bureau, 39,075 couples divorced in the first nine months of this year, up 41 percent from the same period in 2012.

The figure also surpasses the 38,197 couples who divorced during all of 2012. The growth rate of divorces is much higher than in the previous four years.

Official figures show the number of divorces in the city over the past four years has increased steadily. In 2009, about 30,000 couples divorced, and 32,595 couples the following year.

In 2011, 32,999 marriages ended in the divorce court.

In March, the nation introduced a nationwide 20 percent individual income tax levied on capital gains by home sellers.

Previously, only a 1 percent individual income tax was levied on the sale price. The tax hike increased the cost of existing second-hand home transactions and affected speculative purchases in the property market.

However, the regulations allow couples with two properties who divorce and put one house in a former spouse's name to sell their residential property tax-free under certain conditions. They are then able to remarry.

"The rapid growth of the divorce rate in Beijing has something to do with the new property purchase regulations by the government as some people make use of the loophole to avoid the high tax," said Li Ziwei, an marriage expert and vice-president of the Beijing Marriage and Family Construction Association.

Li said the divorce rate clearly soared in the month after the regulation was released in March, adding "this phenomenon not only happens in Beijing, but couples in other first-tier cities, where (property) prices have rocketed in recent years, also use this method to avoid taxes. They can save tens of thousands of dollars".

Li added that the marriage registration department, where divorce applications are also processed, has no responsibility and cannot interfere in the freedom of marriage. Staff in the department would also not know a couples' real purpose for divorcing.

"Even if a couple decides to get a divorce to evade taxes, they say they fell out of love and their personalities are not suitable for each other," Li said.

Tang Can, a researcher from the Chinese Academy of Social Science's women's research center said the 20 percent individual income tax is the reason for some divorces.

"The national regulation clearly harms the stability of families. However, family harmony is the foundation of social stability. The regulation should be revised or changed if it makes families unstable," Tang said.

According to the civil affairs bureau in Shanghai's Minhang district, the number of couples getting divorced daily has increased to more than 30 from less than 10 in the past, and the number of people asking for the issue of single status certificates has also increased.

A Shanghai marriage registration office has put out a sign saying there are risks in the property market and to think twice before getting divorced.

Jiang Yongping, an expert from the Women's Studies Institute of China said some "fake" divorces could lead to "real" problems.

"Some husbands may use this as an excuse to get a divorce from his wife and marry another woman."

Jiang warned that couples should not fake a divorce to make use of the loophole as that could bring about many unexpected consequences.


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